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What are Standard-Essential Patents?

Standardisation allows for increased efficiency and substitutability, thus economies of scale and benefit to the consumer. Information and communications technology (ICT) is an area where standardisation is crucial to enable product development and interoperability, recently in particular in the internet of things (IoT), "smart" and geolocation technology.

The "patent bargain" gives innovators a time-limited monopoly in exchange for publicly disclosing their invention. A patent is a type of property, and as with any property, owners must be able to enforce their rights against competitors who infringe their patents. Without this ability, there would be no incentive to invest in innovation in the first place. Standard-essential patents are those which protect a technology that is unavoidable for the implementation of a standardised technology.

A standards developing organisation (SDO) or standards setting organisation (SSO) develops technical standards for the needs of a group of technology adopters. Examples of these organisations are the European ICT standards organisation (ETSI), the Deutsches Institut für Normung (DIN) and the World Wide Web Consortium (W3C). Adherence to these standards ensures safety and interoperability and promotes development within the industries covered. SDOs allow industry innovators to select the most promising innovations which will provide a basis for future development in their industry. Enterprises contributing patented technologies to the development of a standard are asked to provide a fair, reasonable and non-discriminatory ("FRAND") assurance, in which they undertake to allow the use of patents that are essential to the implementation of the standard, or may become so.

Particularly in the ICT field, many products today involve numerous SEPs - think for example of the different technologies used in a smartphone: those covering phone and Wifi communication, audio, video, touch, and so on. 5G, IoT and "smart car" technologies involve both huge investment in innovation and large numbers of SEPs.

So, there is an inherent tension between patent owners, who have borne the costs of developing the patented technology and want to receive the best possible return on their investment, and the implementers of the standardised technology, who want to pay as little as possible for its use: "innovators versus implementers". Competition rules may also come into play if holders of SEPs are seen to be abusing a dominant position by unfairly handicapping competitors. This may be the case when SEP holders refuse to licence their exclusive rights to implementers, and ask courts to issue injunctions against them.

The tricky part is reaching an agreement which is FRAND and which both sides accept. On 16 July 2015, the Court of Justice of the European Union (CJEU) ruled in Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH (Case C-170/13) that "having regard to the fact that an SEP holder’s commitment to grant licences on FRAND terms creates a legitimate expectation that the SEP holder will in fact grant such licences, a refusal by the SEP holder to grant those licences may constitute an abuse of dominance." (Reported by Norton Rose Fulbright). The Court set out a number of steps that should be followed in SEP patent licensing negotiations.

As the major players in this space are global companies, a question arises as to which is the appropriate jurisdiction for resolving disputes involving SEPs. The UK Supreme Court confirmed in 2020 that while they would not make determinations of infringement or validity on foreign patents, English courts can determine global FRAND licences. The decision concerned a global set of disputes involving Unwired Planet, Huawei, Conversant and ZTE, with interventions from Ericsson, Qualcomm and Apple. This makes English courts an attractive choice for resolving these disputes.

Litigation involving SEPs is likely to continue to increase with further innovation in complex technologies.

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